ROP Term

[realistagent]

please tell me if I'm wrong, but, I have recently come to believe that Term Insurance with return of premium is just about the biggest scam recently devised by the insurance industry, especially for terms of 20 yrs or more.

The only reason to buy 20 or 30 yr term is to guarantee that the premiums won't go up and to have the ability to convert the term into permanent over time, as budget allows and needs dictate. It doesn't mean you are going to keep it for 20 or 30 yrs.

When ROP is added into the policy, which typically doubles the premium, it forces someone to keep it the full 30 years weather they need it or not. If a 30 yr term is dropped after 20 years only about 50% of the premium is returned so the policy holder says "well, I might as well keep it for another 10 years so I get all my money back.

Since I am very inept at writing I will stop there.

Opinions please.

 

[somarco]

ROP term.

Good for the agent.

Good for the carrier.

Poor for the insured.

 

[James]

please tell me if I'm wrong, but, I have recently come to believe that Term Insurance with return of premium is just about the biggest scam recently devised by the insurance industry, especially for terms of 20 yrs or more.

The only reason to buy 20 or 30 yr term is to guarantee that the premiums won't go up and to have the ability to convert the term into permanent over time, as budget allows and needs dictate. It doesn't mean you are going to keep it for 20 or 30 yrs.

When ROP is added into the policy, which typically doubles the premium, it forces someone to keep it the full 30 years weather they need it or not. If a 30 yr term is dropped after 20 years only about 50% of the premium is returned so the policy holder says "well, I might as well keep it for another 10 years so I get all my money back.

Since I am very inept at writing I will stop there.

Opinions please.

Well on the other hand a lot of people that buy into a 401k plan will cash out and take a lost due to penalities and taxes. Does that mean it's just a scam?

ROP will "effectively" pay about or equal to 7% give or take a point, not bad at all. Yes you have to keep the policy for the term brought, as in 15, 20 or 30 years.

Well of course we have those HW-Agents here that have the "Midas Touch" or have the 250 grand plus needed to fund a SMA for those maybe it isn't a great idea.

 

[Bob_The_Insurance_Guy]

First off, ROP is nothing more than a forced savings account. It is not insurance, and I don't present it to anyone that way. I have sold a handful of them to people who really should be saving on their own, but don't. I tell them that it does double the premium, but, if you ride out the term, you will get a little present at the end.

Is it a racket? Well, I'm still sitting on the fence on that.

 

[dragoon]

I found this Return of premium calculator from QuickQuote.com that allows you to compare the rate of return for a ROP policy.

http://www.quickquote.com/ropCalculator

You can see just what a return of premium policy returns over the entire term. Once again if you do cancel before the premium term, all bets are off.

 

[realistagent]

Yes, I agree that you get a decent return. I just think that it really limits peoples choices down the road. If you don't need the ceverage any more, you are forced to keep it.

 

[James]

Yes, I agree that you get a decent return. I just think that it really limits peoples choices down the road. If you don't need the ceverage any more, you are forced to keep it.

I suppose you're correct that it does force one to stay in, yet I rarely envision selling a term product and that the term would not be carried out? Oh well, for the bigger question, are we allowed to use the word "Return"? I mean isn't that a word generally used in financial talk? I mean the next thing some one might actually use the word "Internal Return". :twisted:

 

[agent007]

Like it said before:

Good for the agent/carrier

Not good for the client.

Consider when the last time you paid for something for 20-30 yrs.

 

[somarco]

If you don't need the ceverage any more, you are forced to keep it.

No one "forces" you to keep the coverage.

The only folks I have met that no longer need the coverage are usually the ones in the casket at the front of the church.

 

[STIBROKER]

Like it said before:

Good for the agent/carrier

Not good for the client.

Consider when the last time you paid for something for 20-30 yrs.

not necessarily.....